What is a Personal Loan, and How Do They Work - Loan Trivia


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Friday 25 February 2022

What is a Personal Loan, and How Do They Work


A personal loan happens to be a type of installment credit. Unlike any credit card, the loan will deliver a one-time cash payment to the borrower. The borrower needs to pay back the loan amount and the interest at an equated monthly installment (EMI).

If the borrower has a good credit history, they would be eligible for a quick personal loan with a lower interest rate.

How does the loan work?

Once the loan gets approved, the borrower can receive the cash into their account within 3 to 4 working days, depending on the lender. If the borrower wants to take the loan to refinance existing debt, then they can ask the lender to pay the bill directly instead of taking the loan. However, once you get the small personal loan amount, you can start making the prepayment within 30 days.

Besides, if you take any fixed-rate loan, your monthly installment will remain the same until you pay off your loan amount. But if you take any variable rate loan, you will see a fluctuation in the interest rate. This amount would be different from 1 month to another.

Before you take up a personal loan, you should always take the help of a personal loan calculator to calculate the monthly equated installment. It can help plan your monthly budget so that you don't face a financial crisis at the end of the month.

To take up a personal loan, you need to visit the financial institution online or offline and apply for the same. You should provide the needed documents to get quick disbursal and approval of the loan amount. Make sure that you look for various lenders, including Bajaj Finserv, before choosing the personal loan.

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